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Simple IRA Eligibility/Discrimination


Guest CM Klein
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Guest CM Klein

Limited partnership company in SD is just starting a Simple IRA plan. The majority share holder (99%) of the company is also majority share holder (98%) of a limited partnership company in CA. The CA company already has a Simple IRA in which they selected employee eligibility requirements to be minimum 2 years of employment. Here in the SD company, we want the employee eligibility requirement to be 90 days which is perfectly fine with the brokerage firm administrating the Simple IRA for both companies. The accountant thinks there is a discrimination issue with the government if the two companies have different eligibility requirements being that both companies have the same general partner who own majority stock in both. Any ideas or thoughts?

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The establishment of the second SIMPLE for the controlled group would invalidate both SIMPLE-IRAs. In general, an employer that maintains a SIMPLE IRA may have no other plans (including another SIMPLE-IRA). See specifically IRC Sections 408(p)(2)(D)(i) and 402(g)(5)(A)(vi).

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